2022 promises to be another challenging year for Latin America. Economic and financial concerns combined with political, social and environmental factors slow the region’s recovery from the health crisis caused by the pandemic. The fragility of democratic institutions, the rampant corruption, the recurring social unrest and the urgent climate issues are holding back the long-awaited progress for Latin American countries, which will probably have to be postponed once again. 

Here are the main trends to look out for in Latin America in 2022.

Financial and economic trends

While 2021 was a year of strong economic recovery for Latin America, which grew faster than the world average (6,1%) after having suffered a sharp contraction in 2020 due to the pandemic, 2022 does not look so favourable. The surprising improvement of vaccination campaigns in many countries - Brazil was the country with the highest Covid death rate in the world and now it has managed to fully vaccinate almost 70% of its population  - made many Latin American governments hope for a possible economic recovery. However, the combination of various domestic and international drivers will contribute to slowdown the economy in the region.

Internally, in past years many countries have increased public spending to limit the effects of the pandemic, thereby raising the level of public debt. In 2022, therefore, it is very likely that governments will adopt more restrictive fiscal policies.

In addition, the health crisis has seen a drastic decrease in inflation due to the reduction in the consumption of goods and services (inflation rate at 5% in 2020). In 2021, the inflation rate began to rise along with price increase (inflation at 7,1% in November 2021), so it is expected that monetary policy will also remain constrained by high inflation. This will clearly have an impact on external investment. Rising interest rates coupled with political uncertainty will hamper possible private international investment.

Externally, economic stability will depend heavily on the market strategies of the developed economies, namely the U.S., China and the EU. The post-Covid economic recovery of these countries maintains high demand for imports from Latin America, especially raw materials such as oil and natural gas. The post-pandemic scenario will also see a return of the U.S’ influence in the region that has weakened in recent years. U.S. president Biden stated that he wants to support the economic development of Latin America and he is pushing to create opportunities in this direction. The reaffirmed U.S. presence is strategic in order to curb Chinese expansion, strongly established in the so-called ‘vaccines diplomacy’ that allowed China to start to invest more heavily in the region.

 

Political trends

Political instability will also continue to play a role in Latin America’s events in 2022.

The crisis of governability caused by the erosion of democratic institutions in the region has been going on for a long time.

According to The Economist Intelligence Unit index 2020, only three Latin American countries can be considered full democracies, namely Uruguay, Chile and Costa Rica, while all the others contain authoritarian elements in their government structure.

The rise of populist and increasingly authoritarian governments is due to multiple factors. Among all, the most important are systemic corruption within Latin American government systems, which hinders countries’ development and does not allow the implementation of policies that can benefit society, and popular discontent linked to the inefficient provision of public services.

As a result, the population loses confidence in democratic institutions and relies on leaders who present themselves as “redeemers” to achieve an improvement in their living conditions. An exemplary case of this situation is Brazil. The Lava Jato corruption scandal linked to the largest system of bribes in Brazil’s history led to the arrest of former President Lula (PT) and the dismissal of his dauphin Dilma Rousseff, paving the way for the election of the current far-right president Jair Bolsonaro.

 Moreover, 2021 presented a rich electoral calendar. Among the most important trends is the collapse of the moderate centre in favour of an accentuated polarisation, mainly to the left. Chile, Peru and Honduras have seen the triumph of new leftist presidents leading to a revival of a “faded” progressivism that stands out from that of the early 2000s, because it was precisely less moderate, perhaps in response to the authoritarian excesses we have seen in recent years.

In 2022, presidential elections will be held in Brazil and Colombia, which will be of great political importance.

Colombia presents an interesting pool of candidates. Currently, the leftist Gustavo Petro is favoured in the polls. This is an interesting fact given the history of the candidate, who was involved in the M-19, a guerrilla movement active in Colombia in the seventies. Ingrid Betancourt is also a candidate for the Green Party, a well-known politician who was kidnapped in 2002 by the FARC while in the middle of her presidential campaign.

Colombia is known to be a conservative country and one of the best U.S. allies in the region. If a left-wing candidate were elected, there would be significant political repercussions.

On its part, Brazil will not be outdone, seeing at the centre of the presidential race the current president Bolsonaro and the return of Lula Da Silva. At the moment, Lula is the favourite according to the polls (more than 40%) but Brazilian politics has in the past prepared us for great twists and turns.

The consensus towards Bolsonaro is among the lowest since the beginning of his presidency (it does not exceed 25%) due to the disastrous management of the health crisis and ineffective economic policies. His hope of being able to stay in office for a second term is strongly based on how he will prepare the economic strategy in the upcoming months. On the other hand, if Lula were elected, his presidency is expected to be highly polarised towards the left, and not moderate as his previous terms, following the general trend of new leftist governments in the region. It is likely that Lula will not seek alliances with influential centre parties as in the past, such as the PSDB, and go instead for a more intransigent political agenda.

Social trends

Latin America is well known for its tradition of social instability. Protests and social unrest are recurrent and they are often a sign of popular discontent against the inefficiency of governments policies, corruption, lack of reforms and human rights violation.

Consolidated labour unions are widespread in many Latin-American countries and they allow workers and students to gather and protest for their rights in a more organized way, but very often protests arise spontaneously.

In this regard, it is particularly interesting the case of Colombia as continuous protests could undermine the running of the forthcoming elections.

Colombia has a long tradition of social unrest marked by five decades of conflict between the government and the FARC. Recently, the country has faced a new wave of social unrest. The protests, which began in the pre-pandemic period, have worsened since April 2021. The cause is the promulgation of an unpopular tax reform along with strong inequality and lack of social policies. The demonstrations began peacefully, but there were reports of vandalism by protesters and violent actions by the armed forces. Social unrest is expected to continue at least until the May 2022 presidential elections, perpetuating political and social instability in the country.

 

Environmental trends

These last few years, Latin America has faced a serious health crisis and many environmental problems have been sidelined. With part of the Covid emergency waning, environmental issues have come to the fore.

The region is heavily subject to the disastrous effects of climate change. Long periods of drought, melting glaciers, rising sea levels are increasingly frequent phenomena that must be tackled as soon as possible.

Glasgow COP26 saw many Latin American countries engaged in presenting ambitious roadmaps to tackle climate change.

Costa Rica has announced its decarbonisation plan and is the only country that has started to implement it. Colombia also followed suit with an ambitious plan. The country aims to become completely carbon neutral by 2050.

Argentina and Brazil have pledged to fight deforestation by signing a promising declaration to be implemented by 2030 along with other Latin American nations. Ecuador, Panama, Colombia and Costa Rica have also announced the construction of a marine protected area around the Galapagos Islands to preserve its biodiversity.

At COP26, Latin American countries announced many ambitious commitments to be put into effect in a very short time. One obstacle to their implementation could be the lack of sufficient international funds from developed countries, which Latin American states loudly demanded at the Conference. In addition, political obstacles could hinder the realisation of projects. Brazil’s delegates made great promises in Glasgow, but these do not seem to coincide with President Bolsonaro’s environmental policies. Only a change to the Brazilian presidency seems to allow the completion of the environmental roadmap announced at COP26.

A positive improvement was the commencement of the Escazu Agreement in April 2021.

The Agreement provides for numerous guarantees regarding access to information, public participation and justice in environmental matters. The document has been ratified by 12 Latin American countries, while the ratification of Peru and Brazil is still missing. The Agreement is important in ensuring greater protection for environmental defenders. In 2020, 227 global environmental activists were killed, including one-third in Latin America and 67 in Colombia alone, placing it first as the most dangerous country for environmental defenders.